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A judge on Tuesday said a group of five well-known luxury resorts can begin tapping its $30 million bankruptcy loan from hedge-fund manager Paulson & Co. and Five Mile Capital Partners.

Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan gave interim approval to the resorts' $5 million from the debtor-in-possession loan, money the entity will use to fund its business and its bankruptcy. Judge Sean H. Lane, whose wife was giving birth Tuesday, will oversee a hearing next month at which MSR will ask for the rest of the $30 million.

The resorts, part of a group of holdings formerly known as CNL Hotels & Resorts Inc., were put into Chapter 11 protection early last month by its ownership group, which is led by Paulson and includes Winthrop Realty Trust (FUR:$11.4200,$-0.0600,-0.52%) and Capital Trust Inc. (CT:$2.2100,$-0.1700,-7.14%) .

The Paulson group, which placed the well-known resorts into bankruptcy as they faced a deadline to repay about $1.525 billion in secured debt, called the properties "iconic" at the time of the bankruptcy filing. They include the Doral Golf Resort & Spa in Miami, the Arizona Biltmore Resort & Spa in Phoenix and the Hawaii Grand Wailea Resort & Spa in Maui.

Paulson and its co-investors could face a battle for control over the resorts in bankruptcy court after an affiliate of the Government of Singapore Investment Corp. offered $1.48 billion for the properties late last month. GIC, as it's called, holds mezzanine debt in the resorts and mortgage-backed-securities tied to one of the group's mortgage loans.
The Paulson-led group, which formerly held junior debt in the resorts, seized the properties through a foreclosure proceeding before placing them into bankruptcy, avoiding having to repay the secured debt.

As part of the foreclosures, Paulson's group--called CNL-AB--eliminated $600 million in debt and $200 million of preferred equity that the resorts held. The group previously said it intends to restructure the properties' outstanding debt.
Paulson wasn't immediately available to comment for this article.

In addition to the five resorts in bankruptcy, CNL-AB owns three other resort properties that aren't part of the case. All the properties were formerly part of CNL Financial Group Inc.'s CNL Hotels & Resorts Inc.
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